Beware of the “Lowest” Shop Rates
With aircraft maintenance, shop rates mean nothing. What counts is how much it costs to complete a job properly. Many management companies claim shop rates to be “lower than the competition” but this is no guarantee of lower maintenance costs. The reverse is more usually true due to the inexperience of the people on the shop floor.
Another misleading variant is the management company that claims they “outsource maintenance to take advantage of the bulk buying and other economies offered by a large scale maintenance, repair and overhaul facility.” If it sounds too good to be true, it is.
Welcome to the World of Undisclosed Rebates
The “outsourced maintenance provider” frequently rebates a share of their revenue back to the manager. How much typically depends on how much margin is earned. Bottom line?
The maintenance provider and the manager have a shared interest in the highest possible maintenance profits.
Hiring apprentice shop workers supervised by a skeleton staff of experienced maintenance engineers lowers labor costs to a minimum despite the higher rates charged to the owners. Another practice is to charge a pre-determined book of set billed hours per task. The customer pays the full amount while the maintenance shop tries to do the work faster than book to earn more net revenue. Both practices are a winning combination for the supplier and the manager who shares in the revenue split. Not so good for the customer however in terms of costs or quality of work and overall maintenance reliability (to see other examples of similar situations click here)
Sometimes quality is the last of the manager’s worries. Minimally qualified workers produce more rebate revenue. Even badly performed work has an upside. Mistakes, misdiagnosed faults, unnecessary part replacements and the like just add to volume, revenue and larger rebate revenues for the manager. Most owners are told that “airplanes are complex and they break”. Their managers will also claim that “your safety comes first so we are fixing it whatever it may cost”. But neither comment addresses the true issues which are value for dollars spent and trust.
The Financial Value of Highly Qualified Maintenance Engineers
The best management companies will advise owners that highly competent engineers produce lower costs. They will make the right repair on the first attempt. Training and experience generate results. Take your pick – do you care about a low shop rate when it takes thirty hours to, for example, complete a main wheel axle replacement, when, a mere twenty percent increase in hourly charges for experienced engineers will result in the same replacement being completed in a third of the time?
The math is compelling. The outsourced ”discount” shop rate is a “pennywise, pound foolish” choice.